Moody’s Predicts 40% Chance of Egypt Default in 5 Years


Islamism is apparently how you spell bad investment.

Moody’s cut Egypt’s credit rating on Thursday, citing unsettled political conditions and public finances, which it said raised the chance of a default within five years to nearly 40 percent.

The Egyptian economy has been in crisis since the overthrow of Hosni Mubarak in 2011, with Islamist President Mohamed Morsi’s cash-strapped government grappling with sliding currency reserves, dwindling tourism, a soaring budget deficit and a wave of often violent street protests.

Moody’s cut the country’s credit rating by one notch from B3 to Caa1, which it said meant it now sees nearly a 10 percent chance of Egypt defaulting on its debt over the next year, and slightly less than a 40 percent chance of a default within five years.

It was Moody’s sixth downgrade of Egypt since January 2011, at the height of the uprising that toppled Mubarak soon after.

“Egypt’s fiscal position is very worrying, the deficit has been widening since the start of the fiscal year… This has been exacerbated by rising subsidy expenditure,” said Jason Turvey, assistant economist at Capital Economics in London.

“It’s hard to say how much the downgrades really matter because, after all, Egypt is already considered at junk status,” said Turvey.

The Arab Spring is also at junk status.

  • F.K. Juliano

    The Obama regime is soon going to guarantee all of Egypt's debt. The Muslim Brotherhood regime is too valuable a partner in the ongoing "dialogue" with the Islamic world for it to be allowed to flounder.

  • Brian Donegal

    Muslims states are acting like spoiled, petulant children. Their poverty is their own fault but blame others for their incompetence. The only way they know how to make money is their jizya protection racket against non-muslims.

    • Spikey1

      I once thought the same way but the original egyptian uprising was brought about from food staple price spikes which in turn was the result from inflation caused by the loose dollar policy of the Obama Administration.

      Yes they are incompetent and unable to feed their people – just like the muslims whom reside upon Israel's land and always relying on foreign aid.

      • objectivefactsmatter

        "I once thought the same way but the original egyptian uprising was brought about from food staple price spikes which in turn was the result from inflation caused by the loose dollar policy of the Obama Administration."

        It's not our fault they were so vulnerable. It wasn't toxic gas released on the population. Their whole "civilization" is based on leaching. That's an improvement from the pirate generations…I think…

        • Spikey1

          I think the money manipulators of the world are having the time of their lives and the destruction brought about by this will continue to spread and grow, eventually biting us all in the arse. We will not learn and adjust quick enough to avoid wide spread problems. Egypt, Libya, Greece etc… are just the beginning.

          I have been saying the same things for years and even predicted the collapse of Libya on 3/30/11

  • Spikey1

    I've composed a list of the top 5 reasons to lend money to Egypt (buy Egyptian government bonds) or carry their currency:

    1.
    2.
    3.
    4.
    5.

    I know, I know, hahaha but the reality is that a 10 year bond at 17% T0 23% interest just isn't worth the risk, and they are just gonna print more pounds (Egyptian) causing inflation thus devaluing the currency, so there is no reason to hold that either.

    On a side note: Could someone please help me? For the photo at the top of the story is that Egypt or Detroit? I'm having a hard time telling the difference…

    • objectivefactsmatter

      "On a side note: Could someone please help me? For the photo at the top of the story is that Egypt or Detroit? I'm having a hard time telling the difference…"

      PBS was on one of those cultural apology tours making excuses for their "frugality" because they're so poor they can't throw anything away. Being too busy praying and waiting for "allah" to solve all of their problems directly (for example by having the USA pay more jizya) is more accurate.

      It's not just Egypt. The only Islamic middle class are those barging in on Western civilizations, with a few exceptions, but they're most likely apostates. The bottom line is that middle class Muslims are either stealth jihadis or apostates in Western nations.

    • gee59

      Dearborn

  • UCSPanther

    40%?

    I suspect that it will grow to 100% chance of default after five years…

  • http://www.adinakutnicki.com AdinaK

    NO worries…the Benefactor-in-Chief will not allow his Brothers to starve, nor to default…not a chance – http://adinakutnicki.com/2012/08/13/coming-full-c… ….by hook or by crook…..

    Adina Kutnicki, Israel http://adinakutnicki.com/about/

  • Chezwick

    Chezwick predicts American default in 15 years.

  • gee59

    I believe that Moody's is very optimistic – the true chance is 100% and it will happen far sooner than five years from now. I would not be surprised if it happens this year

  • Ar'nun

    Maybe they have something of value they can sell like a bunch of tanks and fighter jets they got for free?

    But to be fair, I doubt Moodys used the Sharia compliant financial formulas to draw their conclusions. So it will probably be less than 5 years.

  • Questions

    Egypt runs the risk of a revolution that would make the "Arab spring" of two years ago and the "bread riots" of 2008 look like garden parties. The country now has a population of more than 80 million. If the government defaults on its bonds, the country could plunge into anarchy.

  • JacksonPearson

    The Muslim Brotherhood's biggies, will abscond with probably more than Yasser Arafat's 2 billion PLO monies. In the end, it'll be another hooray for me, and scru you.